Business Commons^™

Assessing Happiness: An Evaluation Of The Latin American Paradox In The United States, Daniel J. Maisch

Honors Projects

Abstract: This research project investigates an array of pecuniary and non-pecuniary factors and their effect on happiness trends within the United States’ Latino population. Happiness Economics is a new field of economic study coined in the 1970s by Richard Easterlin. This new field of study laid the foundation for further research and, ultimately, led to the discovery of the Latin American Paradox. The Latin American Paradox identifies high levels of happiness amongst Latinos within Latin America and the United States, with low levels of economic prosperity. This study uses Mental Health data from IPUMS Health Survey to investigate the different …

How Do Bond Specific, Firm Specific And Macroeconomic Factors Influence Corporate Credit Spreads?, Michael Mayberger

Honors Projects

The recession of 2008-2009 showcased the critical role that the corporate bond market plays in providing firms with access to capital, a role reflected by a 300% increase in corporate bonds issued from $600 billion issued in 2007 to $1.8 trillion issued in 2012. In this study, I investigate the bond specific, firm specific and macroeconomic factors that explain the change in corporate credit spreads within the Consumer Staples industry between 2005 and 2013. The results show that the firm specific variables, debt and total assets, have the largest impact on the corporate credit spreads. However, there is a weaker …

Lobbying In The Defense Aerospace Industry, Austin Smiley

Honors Projects

The purpose of this research paper is to identify the main variables that impact an aerospace defense firm’s decision to lobby. This study focuses on important accounting and financial measures specific to each company. It also takes into account government and public variables such as the level of public scrutiny the company experiences and national defense spending. This study finds that cash flow and profitability are both negatively correlated with the decision to lobby. It also finds a positive correlation between inventory turnover and the decision to lobby the following year. Additionally, there is a positive relationship between public scrutiny …

What Causes Bank Failures During The Recent Economic Recession?, Qingyu Li

Honors Projects

More than 400 banks failed during the recent financial crisis. Bank failures have a significant impact on the financial system and the economy as a whole. It is important to identify factors that may contribute to bank failures so that banks can take measures to reduce their default risk. This paper examines how bank specific characteristics and economic conditions affect bank failures during the recent financial crisis. We employ the logistic regression model to study this issue using the U. S. commercial bank data over the sample period 2007-2012. We find that the ratio of the loan and leases to …

Macroeconomic Determinants Of Gold Industry Stock Returns, Michael Chau

Honors Projects

Over the past 12 years, the gold bullion continues to become a significant investment. Financial advisors and analysts have recommended investors invest a small portion of their portfolio into this precious metal commodity asset. Gold mining stocks offer investors the ability to leverage volatile but rising gold prices. The expected relationship between gold price and gold stock returns is that for every 1% increase in gold prices, gold stocks can be expected to gain 2-3%. Building on a multifactor model by Faff and Chan (1998), we examine how macroeconomic factors such as market returns, the foreign exchange rate, and the …

Determinants Of Dow Jones Returns, Cory Sloan

Honors Projects

As of 2010, there was $14 trillion invested in the New York Stock Exchange (NYSE) and $55 trillion invested in stock markets worldwide. In this study, we use the Arbitrage Pricing Theory (APT) to identify the main determinants of the returns of the stocks that compose the Dow Jones for the period 1990-2011. We test several hypotheses on the relationship between firm specific variables such as Dividend Yield, Earnings Yield, Book-Market ratio, previous returns and the stock returns. We also document the relationship between several macroeconomic factors including T-bill rate, Default Spread, Term Spread, Unemployment, Real GDP and Inflation and …

Determinants Of Banks' Total Risk: Accounting Ratios And Macroeconomic Indicators, Michael Salkeld

Honors Projects

During the recent financial crisis, 325 U.S. banks failed whereas only 24 banks failed from 2000-2006. It is important to identify how banks’ operations and changes in the economic environment might influence the total risk level faced by U.S. banking institutions in order to avoid the number of bank failures experienced during the recent recession. This study analyzes publicly traded banks in the U.S. from 1978 to 2010. Various accounting ratios and macroeconomic indicators are used as proxies for the effects of individual bank operations and changes in the economic environment. Total risk, as measured by the standard deviation of …

New Evidence On The Wealth Transfer During The Argentine Crisis, James Lam, Elisabeta Pana, Faculty Advisor

Honors Projects

In this study, we investigate the wealth preservation hypothesis and revisit the theory of wealth transfer from Argentina to the United States during the Argentine crisis. We show that the boom experienced by the Argentine stock market is explained by both wealth preservation through top non-ADR stocks and by wealth transfer through ADR stocks. Argentine investors without access to trading abroad preserved wealth by converting their bank deposits into the most liquid ADR and non-ADR stocks. An investment in a portfolio of less liquid ADRs resulted in a wealth loss, unless used as a vehicle to transfer funds abroad.

Bank Ownership And Management Structure Affects On Principal-Agent Costs And Returning Capital, Joel Wicks, '09

Honors Projects

This paper attempts to add to existing research on corporate payout by focusing on the role that the principal-agent problem plays on dividend policies of public and private banks. The results indicate that private banks are better able to monitor mangers use of excessive free cash flow and retaining earnings and will be more willing to let retained earnings build up without returning them to owners in the form of dividends or stock repurchases.

Surveying Efficiencies Of Nigerian Banks Before And After The Minimum Capital Requirement Increase, Bukola Olaosebikan, '09

Honors Projects

This study investigates the efficiency of the Nigerian banking system between the years of 1999 and 2005. Bank efficiency is evaluated using Data Envelopment Analysis (DEA), and the main determinants are identified by using a Tobit model. The results indicate that efficiency fluctuated during the first part of the period and improved during the recent years, a period associated with the increase in minimum capital requirement. Differences in bank efficiency are explained by problematic loans and bank size.

Small Banking Conditions And Their Impact On The Economic Activity Of Us Firms, Stephanie Bannos '08

Honors Projects

This study is directed towards the effects of bank lending, delinquencies, and other economic shocks on the performance of economic activity. I estimate the effect of these factors on employment, payrolls, and number of firms by firm size in the United States. Addressing conditions within the realm of small banks, one conclusion is that banks increase their total supply of bank credit after a reduction in capital levels. A number of former studies arrive at this conclusion, and this paper applies that hypothesis to more recent data. A common theme in related literature is that a "credit crunch" causes particular …

An Empirical Investigation Of Poison Pill Use In The Banking Industry, Zachary Hooper '07

Honors Projects

This study examines the use of poison pill plans in the banking industry. This research demonstrates that the increasing number of banks adopting a poison pill plan is related to increasing market concentration. There are two hypotheses explaining the intent of these adoptions: (l) Managerial Entrenchment and (2) Shareholder Interest. This study specifically examined these hypotheses in the banking industry between 1986 and 2003. Results indicated that comparison banks not adopting a poison pill had a significant improvement in ROE the year after their peers adopted a poison pill. Additional results of this research contradict the popularly held belief that …

Risk Management Through Derivatives Securitization, Stefan Filip '07

Honors Projects

With the fluctuations in the financial markets reaching tens ofbillions of dollars in just one day, using complex financial instruments instead oftypical insurance could be more effective and cheaper to finance high-severity and low frequency risk exposures. Insurance-linked derivatives such as catastrophes bonds and weather bonds have been used for some time in the United States and European Union. The risks that they cover vary from property catastrophes, weather, general liability, and extreme mortality risks. As the number ofissuers for these securities increases and new over-thecounter (OTC) products appear on the secondary markets there is a growing need to understand …

The Pricing Effects Of European Union Insurance, Andrew Heikes '06

Honors Projects

Shifting from a government-controlled system ofmotor insurance regulation to a marketbased system has caused unexpected outcomes in Italy. Although there is more competition since deregulation occurred twelve years ago, the government has had mixed results attempting to continue to control the market. This paper will examine how pricing deregulation on the European Union level has caused significant changes in the Italian market. Furthermore, it will seek to develop a national solution for regulation ofauto insurance pricing within the United States using Italian experience. Regulation in the insurance industry in the United States has been a subject ofdebate for quite some …

Baseball And Its Anti-Trust Exemption, Jason Korczak '04

Honors Projects

Somewhere in small town America there is a group of young boys with an old tattered ball and a game tested Louisville Slugger playing a pick up game of baseball. It doesn't matter that there is no crowd cheering them on, or that none of the players have a uniform, or even that not one of them is being paid. All of these youngsters are playing simply for the love of the game. And this is how the majority of people in America view baseball, as a game that people play for fun and enjoyment. This is not the case …

Attitudes And Intentions Of Students Regarding Future Alumni Activity, Amy K. Atwood '04

Honors Projects

The Director of Alumni Relations at a small, liberal-arts university in the Midwest approached a university marketing professor about investigating student attitudes and intentions regarding future alumni activity. Information collected from preliminary focus groups helped in the creation of a attitudes and intentions survey given to 322 students. Results showed that students seemed knowledgeable about the fundraising needs of the university, but lacked sophistication about these needs. A targeted marketing campaign aimed at improving students' level of sophistication shows great potential for altering the apathetic attitudes some students have about donating back to their alma mater. Due to the lack …

Privatization In Lithuania: General Environment And Case Studies, Ginte Sabaliauskaite '00

Honors Projects

The crumble of the Soviet Union left Lithuania, like many of its former republics, at a standstill. With the demise of USSR came the demise of markets in the east and it became important for Lithuania to establish economic ties with the west. The first step in this direction is to privatize much of the public property so that it can be managed with a goal of profitability. The privatization of housing and small firms is very important, but the successful privatization of large enterprises plays a crucial role in the country's overall economic success. Profitability of a large enterprise …

Brand Consciousness, Ralph Wright '99

Honors Projects

The objective of this research study was to determine the degree to which people use brand names to make purchase decisions. Further, we questioned what other influences -quality/price/previous buying experience -impacted the decision. This paper will demonstrate that a sample of college students in Central Illinois generally purchase based upon a product's brand name. More specifically, the research findings indicate that these consumers associate a high level of quality with specific brands of clothing.

Measuring Risk-Based Capital, Karen Anderson '97

Honors Projects

In order to assure policyholders that their benefits will be available when they are needed, the National Association ofInsurance Commissioners (NAIC) has begun regulating insurer capital through the Risk-Based Capital (RBC) Model Act for life insurance companies. The Model Act helps state insurance regulators plan to preserve and protect adequate insurance capital levels and maintain insurer solvency. The RBC requirements provide for a ratio which assesses the level of risk that is associated with an insurance company's assets. The purpose of the NAIC's RBC calculation is to develop the minimum amount of surplus needed given the risks assumed by the …

Consumption Taxes: An Examination, Joshua E. Richardson '97

Honors Projects

The current in orne tax system fails to achieve several of these goals. This paper will examine three alternatives to the income tax: a national sales tax, a value added tax, and a personal expen iture tax. The three taxes create the same tax on an item of consumption through different methods. These options will be discussed in comparison to the current income tax on the basis of administrative efficiency, equity, economic consequences, and transitional difficulties.

A Solution To The Shortage Of Capital In The Property Insurance Industry, Amy Gebauer '96

Honors Projects

Due to the recent increase in the severity and frequency of natural catastrophes, insurers believe that insured losses from such catastrophes can exceed $50 billion. There is not enough capital available in the insurance industry to cover such catastrophic losses. Therefore, insurers have begun looking for new sources of capital. The most promising solution is in the capital market, specifically in catastrophe insurance options. The options have a settlement index, which is the market's estimate of the losses for the covered quarter. While these options have advantages as well as disadvantages over reinsurance. The main problem hindering the market is …

Accounting For Derivatives, Craig Ward '96

Honors Projects

This paper will address the issue of disclosure concerning the derivative acitivities of publicly traded companies. The paper will begin by explaining the basics of derivatives and proceed to explain the current requirements in place to date. It will also detail the current developments of proposed new regulations for derivative activities. Then, the paper will present the results of how a sample of publicly traded companies currently account for and report their derivative positions in the financial statements. Finally, I will propose new requirements to account for and report derivatives in the financial statements. These requirements will combine ideas already …

A Different Approach To Term Vs. Whole Life Insurance, Neil Rubenstein '96

Honors Projects

This is study comparing term to whole life insurance. These two life insurance vehicles will be compared using the after-tax dollar figure of the surrender value or death benefit (for the whole life policy) and the total after-tax value of the "difference" and/or death benefit (for the term life insurance policy). These comparisons are not intended to be used to extrapolate the average rate of return needed in the future to justify the extra risk inherent in term life insurance.

The Role Of The Pbgc In Pension Guarantees: An Analysis Of Efficiency And Effectiveness, Jason C. Richards '96

Honors Projects

The retirement-income system in the average American household can be described as a three-legged combination of private and government savings. The first leg includes Social Security and other government welfare programs designed for the elderly. The second is individual savings. This leg includes IRA's, savings accounts and stock and bond portfolios, among other things. The final leg includes Privately-sponsored pension plans (Schmitt, 1993). In simplest terms, there exist two types of pension plans in the United States: defined-contribution and defined-benefit. For general information --as well as later discussion --we will now define both.

The Case For High Returns: A Study Of The U.S. Pharmaceutical Industry, David Taylor '95

Honors Projects

In recent years, the pharmaceutical industry has undergone intense criticism from a myriad of opponents from President Clinton to the common citizen. In fact, Bill Clinton included comprehensive health care reform in his election platform, and the pharmaceutical industry with its high profits has emerged as a scape goat in this debate. Recent developments, including Congress' delay of any legislative health care reform and the election of a Republican majority in both houses of Congress, have decreased the short run potential of any comprehensive health care reform. However, because of the rising costs associated with health care, some sort of …

Advertising Aimed Toward Working Women Before And After World War Ii, Jennifer Bowman '94

Honors Projects

Even at the start of the war in Europe in 1939, women workers were only turned to as a last resort, The war in Europe had brought a flood of economic activity to America. Recovering businesses damaged during the Great Depression were once again prosperous, bringing hope to the American public for a bright future. In fact, World War II quickly "turned the unemployment problem into one of a labor shortage and rocketed the economy into new heights of production and prosperity." (Hartmann, 2) Business was booming and people were working.

Traditional beliefs "that men should be the primary or …

The Adaptation Of Flour Milling Based Companies To Environmental Change, Thomas B. Welge '92

Honors Projects

It might well be argued that no other industry was as important in the civilization of man as flour milling. As man discovered the process of grain milling he was able to evolve from wanderer, to farmer, to city dweller. The sale of flour is considered by many historians to be the first industrial enterprise. Wheat, grown for over 10,000 years, was regarded as a symbol of life and power by the ancient Assyrians, Egyptians, Jews, Greeks, and Romans (steen p. 19). Both the art and business of grain milling evolved as world population grew. The cUltivation and milling of …

The German Automobile Industry's Reaction To The Announcement Of German Reunification: An Event Study, Rhea E. Rosenlof '91

Honors Projects

This study seeks to explore more deeply the economic and political aspects of Reunification and the role of the West German automobile industry in the Reunification process. Due to the importance of the automobile industry in rebuilding the East German economy, an examination of the German automobile industry's reaction to the announcement of Reunification would be an important and informative economic consideration in evaluating the positive and negative consequences of German Reunification. Therefore, through the application of a "special event" methodology utilized in financial research, I intend to discover whether the German automobile industry as a whole, and the individual …

Alcohol Advertising: Freedom Of Speech V. Social Responsibility, Reona Jack '91

Honors Projects

In Illinois, 10% of the population, or approximately 800,000 citizens, meet the criteria to be classified as problem drinkers; nationally, one out of four children comes from an alcoholic home; and, alcohol plays a role in nearly half of America's murders, suicides, and accidental deaths, claiming at least 1,000,000 lives per year.' Not only do these statistics add up to social problems but they also reflect an increasing economic cost to society. Estimates of the cost of alcoholism and alcohol abuse reach nearly $117 billion a year, considering premature deaths, reduced work effort, and treatment.

Effects Of Store Atmosphere On Shopping Behavior, Wendy L. Billings '90

Honors Projects

There is little sound documentation for the actual effects of store atmosphere on shopping behavior. Some retailers have claimed that they have influenced customers' buying behavior by manipulating store atmosphere via layout, color, lighting, and music (wysocki 1979; Stevens 1980). However, this evidence is solely anecdotal. Researchers have been unable to document strong effects of store atmosphere for a variety of reasons. First, the effects evoked by store atmosphere are primarily emotional states that are difficult to verbalize. These emotions are temporary and therefore difficult to recall accurately. In addition, they influence behaviors within the store rather than more easily …